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Migration Informing the Debate
2
www.infometrics.co.nz
This report was prepared by Infometrics
Contact
Gareth Kiernan, Chief Forecaster
Email: [email protected]
Phone: 04 889 0801
While every effort is made to ensure that the information contained in this publication is accurate,
Infometrics Ltd accepts no responsibility for any errors or omissions, or for any loss or damage
resulting from reliance on the use of the information, forecasts or opinions it contains.
3
Migration: Informing the Debate Migration has been a hot topic in the run-up to this year’s election and, with a
range of political viewpoints being put forward, the team at Infometrics thought
we’d do some research to help inform the debate.
Our findings are rather alarming. We may be underestimating net migration by an
additional 4,000-8,000 people per annum, implying net migration of closer to
80,000 people per year than the latest official measure of 72,300.
The migration policy changes announced last October are only having a limited
effect on arrival numbers. Impending policy changes around minimum salary
requirements for skilled migrants could have a severe effect on net migration, and
some organisations are worried that the salary requirements will discourage
migrants from moving to provincial areas.
And to top it all off, the people we previously considered to be relatively temporary
arrivals – students, workers, and tourists – don’t appear to be as temporary as we
thought. The number of people gaining residence visas from within New Zealand
has increased 27% since June 2015.
Against this backdrop of historically high net migration, Gareth Kiernan has
estimated an optimal level of net migration we should be aiming for over the next
decade of between 10,500 and 16,600 people per annum.
Nevertheless, we do not think we should immediately shut the doors on migrant
arrivals. Annual net migration currently stands at 72,300 people and we need to
gradually wean the economy off its dependence on migration. It will take at least
seven years to bring net migration back down within a 10,500-16,600pa range, and
the government should start implementing measures that have this long-term view
in mind.
The articles in this report discuss these ideas in depth.
4
Table of Contents 1. Are we underestimating our migrant numbers? ..................................... 5
Net migration was severely underestimated in 2003 ................................... 5
Are we underestimating net migration now? ............................................................ 5
Tourists that fall in love with New Zealand ...................................................... 7
Only two-thirds of workers stay on board for more than 12 months ......... 7
Students know what they’re doing ..................................................................... 8
Permanent residents pump up otherwise on-the-money resident visa
arrival data ............................................................................................................... 9
And then there’s New Zealanders themselves ............................................... 10
By how much might we be underestimating population growth? ............. 10
2. Long-term implications of high net migration ....................................... 11
So what’s the real problem? ................................................................................ 11
Resident visa approvals are higher than they used to be ....................................... 11
And are kept high by applications from people already in the country .............. 11
Offshore resident visa approvals are declining, indicating future decreases in
resident visa arrivals ....................................................................................................... 13
Conclusion................................................................................................................ 13
3. Will government rule changes have a big effect on visa approvals? ....... 15
October 2016 rule changes have already affected offshore approvals ... 16
April 2017 rule changes target the biggest category of resident visa
applicants ................................................................................................................. 16
Which industries are most affected by the changes to work visa rules?. 17
But there is significant backlash from industry stakeholders .................... 18
4. New Zealand research on the effects of migration ............................... 20
5. Most people coming from Australia are… Kiwi .................................... 22
Why are we so interested in arrivals from Australia? ................................. 23
How does Australia rank if New Zealanders are taken out of the
equation? ................................................................................................................ 23
What does this all mean? .................................................................................... 23
6. Migration’s contribution towards a more stable economic performance . 25
New Zealand’s population growth in a global context ................................. 26
5
1. Are we underestimating our migrant numbers?
New data from Statistics NZ shows that migration, as we currently track it, is not
always representative of true long-term migration. Using this information, we
know that net migration in 2003 was severely underestimated. Given current
labour market conditions and the attraction for both foreigners and returning New
Zealanders to stick around, we believe that long-term net migration could currently
be underestimated by 4,000-8,000 people.
Net migration was severely underestimated in 2003
New statistics on net migration show that there is a propensity for people to come
to New Zealand as visitors but end up staying long-term. On the flipside, people
leaving New Zealand tend to do the same when they travel overseas, and New
Zealanders tend to “overstay” to a much greater extent. The net outcome shows
that arrival card data was slightly overestimating the number of people adding to
New Zealand’s population long-term between 2010 and March 2015.
However, periods of underestimation can also occur and can be in the order of tens
of thousands of people. During the previous migration boom in 2003, net
migration was actually 18,000 people per annum greater than initially indicated by
arrival cards. This underestimate added an extra 45% to the number of permanent
migrants we thought were entering the country, and made half a percentage point
difference to population growth at the time.
Graph 1
1
Are we underestimating net migration now?
In general, the count of arrivals at the gate underestimates actual long-term
arrivals by about 10%. But the extent of this undercounting has reduced over the
past decade, representing tighter restrictions around long-term visas. As a result,
more people are moving to New Zealand with a long-term visa already in place (and
are thus measured as such at the arrivals gate).
1(1) The 12/16-month rule defines a migrant arrival as someone who, from the time that they first arrive
in New Zealand, spends at least 12 out of the following 16 months in New Zealand. In contrast, someone
departing New Zealand is classified as a migrant under the 12/16-month rule if they spend 12 or more
months overseas from the point of their departure.
-20,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
02 04 06 08 10 12 14 16
At-the-gate count a good ballpark for net migration?
Annual net migration as measured at the gate and after 12-months
At-the-gate net migration
Net migration 12/16-month rule (1)
6
In contrast, the absolute number of people leaving the country as tourists but
staying overseas long-term has stayed about the same between 2007 and 2015.
For the first few months of 2015 (which is the last few months of available data),
the number of departures was being underestimated by more than the number of
arrivals, and the gap between the two was widening. This widening gap means that
at-the-gate figures were overestimating the effect of net migration on population
growth in the March 2015 year, and the number of people coming into the country
was a bit smaller than thought (by almost 4,500 people).
Graph 2
But how might at-the-gate migration be behaving relative to the actual long-term
movements now?
Tighter visa restrictions mean that fewer people are likely to come to New Zealand
without a long-term visa already in place. With a raft of new restrictions around
student visas, and the increase in constraints for work visas, at-the-gate arrival
figures for these visa categories are less likely to undercount true long-term
arrivals going forward.
However, an increase in the propensity for tourists to extend their stay in New
Zealand could more than offset this change, at least for the 12/16-month period
(see definition in footnote for Graph 1). At the previous net migration peak in 2003,
we estimate that just under 20,000 tourists opted to stay here long term,
contributing to a 27% underestimation of long-term arrivals using arrival card
data.
The undercount of departures from New Zealand has been relatively stable over
the ten years to 2014/15. But, instability in global politics within the last 18 months
(eg, Donald Trump’s presidency, longer wait times to gain citizenship in Australia,
and the Brexit decision) might undermine people’s ability to obtain solid job offers
while on their OE. Despite this risk, we continue to anticipate that 10,000-15,000
people per year will leave the country as tourists but ultimate becoming
expatriates.
In summary, owing to the sharp lift in tourist numbers and the number of
employment opportunities that entice people to stay, we’re likely to be
underestimating net migration.
The remainder of this article discusses the breakdown of arrivals by migrant status
(visitor, student, work, resident, and New Zealander or Australian).
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
02 04 06 08 10 12 14
How much is it out by?
Difference between at-the-gate measures and 12/16-month rule actuals
Arrivals Departures
A positive number is the number of additional people leaving or arriving
over and above the figures recorded on arrival and departure cards.
7
Tourists that fall in love with New Zealand
Tourists who extend their stay in New Zealand are the biggest factor behind long-
term arrivals being higher than at-the-gate measures suggest. According to data
from Immigration NZ, almost two million people arrived in New Zealand on a visitor
visa during the May 2017 year. However, fewer than 6,500 visitors are counted as
migrants at the gate because they’ve indicated intentions to stay for at least 12
months on their arrival card. The rest are generally considered to be tourists.
It appears that more tourists are extending their stays in New Zealand after
they’ve arrived in the country. The new data from Statistics NZ shows that, in the
year to March 2015, an additional 15,000 tourists stayed in New Zealand long
enough to be reclassified as migrants. Furthermore, the difference between the
number of tourists becoming migrants and the number of “visitors” who were first
measured as migrants at the arrivals gate lifted since early 2013.
But a Statistics NZ report on the 12/16-month rule shows that this difference was
even greater prior to the 2008 Global Financial Crisis, suggesting that tourists tend
to stay in New Zealand for longer in times of economic plenty. Given the strong
growth in employment and economic activity we’ve seen since 2013, the number of
tourists staying in New Zealand long-term is likely to have continued increasing
over the past two years.
Graph 3
There may also be an additional lift in at-the-gate visitor arrivals as a result of
recent rule changes. The April 2017 round of rule changes for skilled migrants
means that spouses and children will no longer automatically obtain work and
student visas and must be eligible for these visas in their own right. As a result, we
could see an increase in at-the-gate visitor arrivals that might have otherwise been
accounted for in at-the-gate work and student visa arrivals. Spouses and children
of skilled migrants can arrive on visitor visas but are likely to switch over to
student or work visas once they’ve established themselves in New Zealand.
Only two-thirds of workers stay on board for more than 12 months
In contrast, a smaller proportion of the people that come to New Zealand on a work
visa actually remain here for 12 months or more. There is a gap of 25-39%
between at-the-gate work visa arrivals and the number of people that ultimately
stay here for 12 months or more in the following 16 months. This result reinforces
the idea that a good chunk of arrivals on work visas are essentially tourists doing a
spot of holiday work to fund their travel.
1,000,000
1,300,000
1,600,000
1,900,000
2,200,000
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
05 07 09 11 13 15 17
Come for a holiday, stay for a job?
Annual visitor visa arrivals
At-the-gate visitor visa migrant arrivals
Arrivals who were on visitor visas 12 months later
Arrivals on visitor visas, New Zealand Immigration A1 tables
8
Migrants on work visas have been a key driver of growth in migration for the past
five years. In the year to June 2017, work visa arrivals made up a third of total
arrivals into the country. If we readjust arrival numbers by people’s propensity to
stay, long-term arrivals on work visas would be closer to 30,000 people per year,
rather than 45,000pa, and make up only 18% of all arrivals.
Graph 4
Students know what they’re doing
Out of all the arrival statistics, student visa arrivals are the most representative of
what transpires over the next 12-16 months. Most students intending to stay in New
Zealand for more than 12 months generally do so. This result is unsurprising given
that students often have their course plans in place, and therefore know the
duration of their study, before arriving in New Zealand.
However, long-term migrant data has been diverging from at-the-gate arrival
statistics since 2010. This shift suggests that some students with short-term study
plans are extending their stay in New Zealand. These students will not be picked up
as migrants initially, but will then be counted as per the 12/16-month rule. In the
year to March 2015, the difference between the at-the-gate count of student
migrants and the number of students staying here for 12 months or more was 2,214
people.
Graph 1.5
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
05 07 09 11 13 15 17
Let's stop overcounting work visa arrivals
Annual work visa arrivals
At-the-gate work visa arrivals
Arrivals who were on work visas 12 months later
0
5,000
10,000
15,000
20,000
25,000
30,000
05 07 09 11 13 15 17
More students try NZ before buying their education
Annual student visa arrivals
At the gate student visa arrivals
Arrivals who were students 12 months later
9
Nevertheless, the tightening of English language requirements outlined in June
2015 and introduced in October 2015 looks to have curbed the number of short-
term students extending their trips. As a proportion of at-the-gate arrivals, the
number of student migrants remaining in New Zealand for at least 12-16 months
following their initial arrival date hit its peak in November 2015. The timing of this
peak aligns with the idea that, once the rules were changed in October 2015, those
who arrived within the year prior (November 2014-October 2015) had more
difficulty extending their study visas than previous applicants (see Graph 6). We
believe that the proportion of short-term student arrivals extending their stay
(beyond 12 months) is sliding back to its 2013 level when regulations were more
restrictive.
Graph 6
One limitation of the 12/16-month rule is that it only tracks a person’s travel for 16
months after their arrival in New Zealand. Although this gives us a clear indication
as to how many people are staying here for more than a year, it does not tell us
whether they end up staying here for two years or more.
Secondly, this data categorises arrivals based on the visa category under which
they first entered New Zealand. Thus we don’t capture the subsequent pathways
that arrivals take after they get their student visa. The number of students (or
visitors) that end up gaining employment in New Zealand and transitioning to a
work or resident visa are not captured in the 12/16-month rule.
Recognising these limitations, and the scope for migrants to enter the country on a
student visa but to then transition to other visa types, we have looked further into
resident visa data in another article here.
Permanent residents pump up otherwise on-the-money resident visa arrival data
Prior to 2011, when the permanent resident visa category was introduced, most
resident visa holders arriving in the country tended to stay for the next 16 months –
which is unsurprising given the restrictions around travel for resident visa holders.
A definitional change in 2011 and the introduction of the permanent resident
category makes it difficult to compare 12/16-month stay data to arrival card data.
Permanent resident visas are available to people that have held a resident visa for
two years or more. The addition of this category resulted in an upward level shift
in the total number of people arriving on resident visas.
80%
85%
90%
95%
100%
105%
110%
115%
05 07 09 11 13 15 17
Language requirements dent conversion rates
Students 12 months on as a proportion of at-the-gate student arrivals
Students as a proportion of
at-the-gate student arrivals
<- Enforced
Languagerequirement
rule change introduced ->
12 months prior to rule change ->
10
However, whichever way we look at the data. we have noticed a general decline in
the proportion of people still in New Zealand on their resident visas 16 months after
arrival. This trend really began to take hold in late 2014, despite at-the-gate arrival
measures increasing further since.
And then there’s New Zealanders themselves
According to Statistics NZ, New Zealanders visiting home often indicate a short
length of stay when, in reality, they end up staying for good (or at least more than
12 months). This trend might have blown out over the past year given favourable
labour market conditions and some sectors crying out for workers, but it is unlikely
to outweigh the overestimation of work visa arrivals.
Graph 7
By how much might we be underestimating population growth?
Given current labour market conditions and the attraction for foreigners and New
Zealanders alike to stick around, arrival card measures are probably
underestimating net migration’s contribution to population growth. This result is
most alarming given that at-the-gate measures already put net migration at 72,305
people for the year to June 2017. Excluding the effects of recent changes to visa
requirements, the difference between the at-the-gate measure and actual long-
term net migration could be in the ball park of 4,000-8,000 people – not quite as
big as the undercount in 2003, but still representing an additional 6-11% on current
record-high net migration levels.
Our next chapter talks about the implications of strong net migration. Most people
gaining New Zealand residency are already here on other visas, and with the
tightening of resident visa rules in October, resident visa approvals are now even
more skewed toward onshore applicants.
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
More New Zealanders come home for good
Annual New Zealand and Australian citizen arrivals
NZ citizen as recorded 12 months after arrival
At-the-gate NZ citizen arrivals
Australian citizens as recorded 12 months after arrival
At-the-gate Australian citizen arrivals
11
2. Long-term implications of high net migration
New Zealand has gained around 72,000 more people in the past year according to
arrival card data, and we’re feeling the strain of squeezing all these extra people
into our cities. But further analysis of visa data suggests that there are longer-
term implications for these high arrival levels that, if left unchecked, could pose a
problem for policymakers when we come off the high point in the business cycle.
So what’s the real problem?
A big chunk of the lift in net migration over the last four years is due to people that
government policy doesn’t have any controls on – Kiwis and Aussies coming from
the other side of “the ditch”. But delving into the numbers a bit more shows that
perhaps we should start tightening up on pathways to residency, particularly if we
think about what New Zealand might look like when the business cycle enters into
a downturn.
The main issue is the number of people that will have license to stay in New
Zealand when we hit a downturn and employment growth dries up. The number of
arrivals on resident visas is one indicator of how many people can stick around, but
there are more round-about ways for people to get permanent residence – and
those pathways are the ones we’re concerned about.
Resident visa approvals are higher than they used to be
Between the end of 2012 and June 2017, annual resident visa applications have
lifted 19% and approvals have risen by 21%. These increases occurred in two
bursts in late 2013 and in mid-2015, but the number of people who had their visa or
permit2 applications declined has held stable at 7,500-8,500pa since 2011.
Graph 8
And are kept high by applications from people already in the country
Breaking visa approval data down by where people applied for their visas shows
that the vast majority of people applying for resident visas are already in New
Zealand. People applying for resident visas from onshore could already be here on
2 Permits were largely phased out by September 2013.
0
10,000
20,000
30,000
40,000
50,000
60,000
09 10 11 12 13 14 15 16 17
Resident visa approvals sitting high
Visa and permit applications, annual total
Approved
Declined
12
a work visa, student visa, or partnership visa, or they could be visitors who have
decided that they want to stay (and have been allowed to).
Graph 9
Growth in resident visa approvals is also stronger for onshore applications. The
number of people who have been approved for resident visas that have applied
from within New Zealand may have only increased 1.2% over the year to June 2017,
but it has climbed 27% since June 2015.
The size of onshore visa applications relative to offshore applications highlights
that arrival card data will not be completely representative of the number of
people that end up staying in New Zealand long term. Migration is generally
measured by arrival and departure cards. People who come into New Zealand with
a resident visa will be counted, but people who became residents from within the
country are usually counted in terms of the visa on which they arrived in the
country.
As a result of using arrival card data to track migration, people arriving on student
visas were initially thought to be somewhat temporary as migrants. There was an
assumption that people who come here to study would generally return home at
the end of their coursework. But the lift in onshore visa approvals 18 months after
a lift in student arrivals suggests that a proportion of student arrivals might be
more permanent than previously thought (see Graph 10).
Between 2013 and 2015, the number of students coming to New Zealand each year
rose from 15,398 to 27,868 – an additional 12,500 people per year. Factoring in an
18-month period for people to transition from study into work, between mid-2015
and mid-2017, the number of people approved for visas from within New Zealand
rose from 30,785 to 38,982 – an additional 8,000 people.
Without knowing the previous visa status of residence applicants, we cannot say
for sure that this lift in onshore approvals was driven by the lift in student arrivals.
But we think it is worth considering the effect student arrivals might have on
future resident visa applications. If students are a key driver of onshore
applications, the tightening of English language requirements for international
students in late 2015 could lead to a decline in onshore resident visa applications
during the rest of 2017 and 2018.
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
09 10 11 12 13 14 15 16 17
Most people gaining residency are already here
Visa and permit approvals, annual total
Onshore
Offshore
13
Graph 10
Offshore resident visa approvals are declining, indicating future decreases in resident visa arrivals
Approval data suggests that resident visa arrivals are set for a sharp decline. The
number of people applying for resident visas from offshore has dropped 32% since
rule changes were put in place in October last year. We estimate that the number
of offshore resident visa approvals precedes resident visa arrivals by about 12
months, as applicants take time to prepare for their move once they’ve been
approved. This lag means that the fall in offshore applicants has yet to really
affect resident migrants as measured by arrival card data.
Graph 11
Furthermore, this drop-off in offshore resident visa approvals indicates that fewer
people will become migrants using direct channels. Rising numbers of work visa
arrivals, still-high numbers of people coming here on student visas, and elevated
approvals for onshore visa applications all suggest that people applying for
residency from within New Zealand are less affected by the rule changes.
Conclusion
A large proportion of people who apply for resident visas apply from within New
Zealand, meaning that arrival card data doesn’t adequately record how many
people are staying in the country long-term. Migration policy needs to carefully
25,000
30,000
35,000
40,000
45,000
10,000
15,000
20,000
25,000
30,000
08 09 10 11 12 13 14 15 16 17
Are students staying on to become residents?
Student visa arrivals vs. onshore resident visa approvals, annual totals
Student visa arrivals
Onshore visa approvals (RH axis)
3,000
5,000
7,000
9,000
11,000
13,000
15,000
17,000
19,000
08 09 10 11 12 13 14 15 16 17
Resident visa arrivals in for a sharp decline
Resident visa arrivals vs. offshore resident visa approvals, annual total
Resident visa arrivals
Offshore resident visa approvals
Offshore resident visa approvals, 12 month lag
14
consider student and work migrants as potential residents and be appropriately
tailored to focus on possible pathways to residency.
In the following chapter, we discuss the government’s October 2016 and April 2017
rule changes regarding resident and work visas. We break down resident and work
visa approval data by applicant and occupation categories respectively. This
breakdown gives some clues about how which these rule changes might affect the
New Zealand labour market.
15
3. Will government rule changes have a big effect on visa approvals?
The government has been successively tightening the rules for resident visas since
October 2016. The purpose of these rule changes ostensibly is to reduce the
number of people moving to New Zealand while not cutting off the supply of
workers for our overstretched labour market. But each set of rule changes will
have very different effects for migrants on work and resident visas. In this article,
we outline the rule changes and discuss the implications of these changes for
migration numbers and industry stakeholders.
October 2016 rule changes
• Parents are no longer able to get resident visas via their child’s visas – they
must obtain the visa in their own right.
• Families: there is a quota on the number of people that can move to New
Zealand under the capped family visa category. In October 2016, this quota
was reduced from 5,500pa to 2,000pa for the June 2017 and 2018 years.
• Points requirements for skilled migrant applicants were lifted. Skilled
migrant visas are a subset of the resident visa category.
April 2017 rule changes
To be implemented August 28.
Applicants for residency under the skilled migrant category
• The government proposed that skilled migrant applicants must prove a
salary of over $49,000pa.
• There are two other remuneration thresholds affecting potential skilled
migrants: an annual salary of $73,299 will put a migrant up for
consideration as a skilled migrant even if they don’t fit in an accepted skill
level category. An annual salary equal to or over $97,718 will gain an
applicant bonus points for a skilled migrant resident visa3.
• More points will be awarded for work experience and education,
particularly skilled work experience in New Zealand and in ANZSCO skill
level 1, 2, and 3 occupations. Migrants with masters and doctorate degrees
have access to more points, but points for their partners will be determined
by their partner’s own level of education.
• People in the 30-39 year age group will have access to more points.
• Spouses and children of skilled migrants no longer automatically receive
work or student visas because their partner/parent is a skilled migrant.
They must apply and be approved in their own right; otherwise they can
come to New Zealand as visitors for three months.
• Selection from expressions of interest submitted after July 19th
2017 (to
become a skilled migrant) have been put on hold until further notice.
3
Remuneration thresholds will be updated annually based on New Zealand income data.
16
Other (mostly work visa-related) policy changes
• Pay band-related regulation has also been announced for Essential Skills
work visas. Migrants earning under 85% of the median New Zealand
income (currently $41,538), will be classified as “lower-skilled” and subject
to a 12-month stand-down period after three years. Migrants earning more
can remain in New Zealand on an essential skills work visas if they earn
between $41,538 and $73,299 and work in an ANZSCO level 1-3 occupation
or if they earn above $73,299.
• Seasonal workers will only be able to stay in New Zealand on their work
visa for the duration of their work, rather than the full year.
• A total of 4000 South Island temporary (work) migrants have been given
the option to gain residency if they stay in their region and industry for the
next two years.
October 2016 rule changes have already affected offshore approvals
Most of last October’s rule changes were targeted at family resident visa
categories. Since then, there has been a sharp drop in offshore visa approvals
across all family visa categories except dependent children. This drop-off will
stabilise by October next year, with future declines under these rule changes
unlikely.
Graph 12
Prior to the rule change last October, a tailing-off in skilled migrant visa approval
numbers was already occurring. The increase in points requirements for skilled
migrants will only just be starting to affect skilled migrant approval numbers now.
Due to the procedure for applying for resident visas, the people that had already
been invited to apply for residency before October will not have been rejected on
the basis of the change in points requirements. It is unknown as to why offshore
applications for skilled migrant visas was already declining before the rule changes
were introduced.
April 2017 rule changes target the biggest category of resident visa applicants
Skilled migrants are the biggest subcategory of both onshore and offshore visa
applications, but 86% of skilled migrants apply from within New Zealand. Skilled
migrants made up half of all resident visa approvals in the year to June 2016 and
are the main target of the April 2017 rule changes.
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
09 10 11 12 13 14 15 16 17
Widespread drop in offshore visa approvals
Applications approved, annual running total
Business - Skilled Migrant International / Humanitarian
Family - Dependant, Child Family - Family Tier 1 & 2
Family - Other Family - Parent
17
Graph 13
The second-biggest contributor to onshore applications, and less than half the size
of skilled migrant applications, is people coming here on partnership visas. Over
the year to June 2017, 9,919 people were approved for partnership visas to be
residents in New Zealand. The effect of resident visa rule changes will have no
direct effect on the partnership visa count, but if fewer people are approved for
skilled migrant visas, it is likely that fewer people will be eligible for the associated
partnership visas.
Graph 14
There has been a gradual lift in work-to-resident visa approvals since 2013, but the
April rule changes do not tighten restrictions for workers using this pathway to
residency.
Which industries are most affected by the changes to work visa rules?
The number of people arriving on work visas has climbed steadily since late 2010.
In the year to June 2017, the number of people arriving on work visas was up 10%
from a year earlier. But the rule changes around temporary migrant visas only
affect those in the Essential Skills category (as opposed to those on working
holiday visas, who presumably make up most of the people that leave New Zealand
within 12 months). Essential Skills visa applicants made up 15% of all work visa
approvals over the year to June 2017.
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
09 10 11 12 13 14 15 16 17
Most onshore applicants are skilled migrants
Approved resident visa applications, annual total
Skilled Migrant
Other
0
2,000
4,000
6,000
8,000
10,000
12,000
09 10 11 12 13 14 15 16 17
Partners next in line
Approved resident visa applications, annual total
Family - Partnership International / Humanitarian
Business - Work to Residence Business - Investor Category
Family - Other Business - Other
18
Essential Skills work visas currently allow workers to live and work in New Zealand
for up to three years, with the option to reapply for the same visa at the end of the
period. The rule changes proposed in April require those earning under $41,538, or
earning under $73,299 in an occupation not classed as being ANZSCO level 1-3 (a
measure of skills), will face a stand-down period of 12 months before they can
reapply for a new work visa.
Breaking Essential Skills work visa approvals down by occupation suggests that the
sport and personal services sector is most exposed to the April rule changes,
followed by the hospitality and food industry. Given the high proportion of people
on work visas whose occupations are in low-paying industries such as hospitality
and personal services, the new income thresholds could affect thousands of
applicants if they are hoping to stay in New Zealand on work visas for more than
three years.
Graph 15
According to Immigration NZ, between 38% and 46% of Essential Skill visa holders
will be classified as “lower-skilled” purely on the basis of their low salaries. These
figures equate to 9,700-11,800 people here on Essential Skill work visas. In
addition, just over 11,000 people do not even have the qualifications to hold their
Essential Skills visa for more than three years, except the few that earn above
$73,299pa.
We know that only two-thirds of people arriving on work visas stay for more than a
year, suggesting that some firms are used to training new staff on an ongoing
basis. However, the three-year time limit poses an ultimatum for business owners
regarding migrants on work visas – either train them to a skill level justifying a
$41,538pa salary or be prepared to let staff go within three years. As
remuneration can differ regionally and across occupations, this salary restriction
may curb some of the foreign labour supply to regions and direct more migrants to
the cities where they are better able to obtain higher-paying jobs. Minimum salary
requirements may also raise the overall cost of employing workers in some areas,
encouraging employers to adopt increased automation to achieve growth in output
and boost worker productivity.
But there is significant backlash from industry stakeholders
The October 2016 rule changes affect a small group of resident visa applicants and,
as a result, were met with very little complaint. In contrast, April’s proposed rule
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
13 14 15 16 17
Top six essential skills occupations
Annual total essential skill work visa approvals by occupation
Sport and Personal Service Food Trades
Construction Trades Hospitality, Retail Managers
Farm, Forestry and Garden Health Professionals
19
changes apply to a large proportion of resident and work visa applicants and have
attracted significant backlash from industry stakeholders.
Stakeholders have argued that the minimum salary requirement is a blunt
instrument that would disproportionately hamper labour-starved regions. In terms
of temporary work visas, the minimum salary requirement is determined by the
median New Zealand income. But average salaries in provincial areas are typically
below the nationwide median, while urban areas tend to offer higher-paying jobs.
Where a region sits relative to this 85% of the median income line will affect the
flow of migrant labour into these areas.
Although we agree that high skilled remuneration bands better acknowledge high
value-adding workers, we think that the salary-based definition for low-skilled work
might create unwanted ructions in the New Zealand labour market. At the same
time, it is difficult to offer alternative policy solutions in this case, with area-based
salary requirements likely to be an administrative headache.
We recommend that the government reconsiders implementing its lowest
remuneration band for work visas, but retain the remuneration bands for skilled
migrant residency applications. Retaining salary restrictions around resident visas
is still blunt, but represents a minimum skills requirement for people intending to
remain in New Zealand long term. The idea behind this policy is that the more skills
you have, the more you can contribute to New Zealand’s productive output, and
that you are less at risk of unemployment.
In contrast, work visas should remain an option for people staying temporarily in
New Zealand, with minimum skill or income requirements being less important.
People in New Zealand on work visas will tend to stay only as long as there is work
available, regardless of the region.
In the following chapters, we discuss the effects that the migrants we can’t control
(New Zealanders and Australians) have on net migration, and how we should target
net migration as a whole.
20
4. New Zealand research on the effects of migration
There has been a significant body of research over the last decade into the effects
of immigration on various aspects of the New Zealand economy, much of it done by
Motu, as well as the Reserve Bank, Treasury, or in conjunction with the Ministry of
Business, Innovation and Employment. Some of the key findings from this research
include the following.
Research on the effects of migration on the New Zealand housing market is mixed.
A lift in migration flows equivalent to 1% of the population could push up average
house prices by between 6% and 12%, with the effects of an increase in arrivals
greater than an equivalent decrease in departures. Returning New Zealanders
have a greater effect on house prices than changes in the number of foreign
immigrants. However, regional analysis suggests that much of the correlation
between net migration and house price movements might be caused by other
factors (such as economic growth or income growth), rather than there being a
strong causal relationship between migration and house prices.
A lift in net migration might have a large positive effect on house prices in the
short or medium-term due to delays in the response of the residential construction
sector to increased demand for housing and/or more optimistic expectations about
future property values. In our view, a lack of capacity in the construction sector
because of very low levels of activity following the Global Financial Crisis (GFC)
suggests that the relatively limited response in residential building has been a
significant factor in the house price boom of the last five years.
Migrant networks are an important factor when foreign immigrants are choosing
where to settle in New Zealand, despite this country’s skills-focused migration
system. Labour market opportunities become a more important factor the longer
that the migrants have been in New Zealand. In this regard, the fact that Auckland
has a high proportion of immigrants potentially becomes self-reinforcing, placing
stress on the region’s housing market, civil infrastructure, and education and
health services.
Migrants to New Zealand face an initial entry disadvantage in terms of both their
employment rates and wage rates compared with equivalent New Zealand-born
workers. This disadvantage reduces over time for some immigrants. Less-skilled
migrants tend to suffer continued lower employment and wage rates than
comparable NZ-born workers, but these labour outcomes are still likely to be
superior to the opportunities available in these migrants’ home countries.
Higher net migration inflows do not have a significant negative effect on
employment or wage rates for NZ-born workers, but instead negatively affect the
labour market outcomes of other recent migrants. The implied boost to aggregate
demand from increased net migration appears to improve employment and wage
rates for NZ-born workers, particularly those in the medium-skill subgroup.
There is no evidence that the increase in temporary migrants over the last 15 years
has had a negative effect on labour market outcomes of New Zealanders. This
conclusion continued to hold true in the wake of the GFC when the labour market
softened but there was less downward adjustment in the employment of temporary
migrants.
There is little evidence that New Zealand’s skills-based immigration policy of the
last 25 years has led to improved productivity or living standards across the
economy. However, changes to immigration policy last decade appear to have
improved the integration of new immigrants into the labour force due to better
occupational and skills matching.
21
22
5. Most people coming from Australia are… Kiwi
A few months ago, Winston Peters complained that arrival data used by Herald
reporters mistook arrivals from Australia as Australians (spoiler – it didn’t). But he
did raise an interesting question: who does come over from Australia when they
move here long-term? It turns out that almost two thirds of people moving from
Australia to New Zealand are, in fact, Kiwis.
Graph 16
Interestingly, however, the pool of people crossing “the ditch” has become more
diverse over time. At the previous net migration peak in May 2003, New
Zealanders and Australians made up 94% of arrivals from Australia, compared to
84% currently). Although the proportion of Kiwis coming over has been more or
less the same, the number of Australians moving to New Zealand has not increased
quite as quickly over the past decade as the number of people holding other
citizenships.
Graph 17
Up until 2007/08, arrivals of “other” citizens were stable as a proportion of total
arrivals from Australia. But since then, the proportion of Australians coming to
Arrivals from Australia by citizenship
Year-ended June 2017
New Zealand Citizen
Australian Citizen
Other
0%
10%
20%
30%
40%
50%
60%
70%
80%
80 83 86 89 92 95 98 01 04 07 10 13 16
Fewer Australians than ever before
% of annual arrivals from Australia
New Zealand Citizen
Australian Citizen
Other
23
New Zealand has dropped and the proportion of other citizens has risen to fill the
gap.
Why are we so interested in arrivals from Australia?
Arrivals from Australia are not something to thumb your nose at. Over the year to
June 2017, arrivals from Australia made up 20% of all long-term migrants to New
Zealand (as measured at the arrivals gate). In other words, long-term arrivals that
are actually returning New Zealand citizens are very significant in terms of overall
migration numbers.
Graph 18
How does Australia rank if New Zealanders are taken out of the equation?
Taking Kiwis out of the equation, Australia is only our third biggest source country
for migrants, following China and the UK. But the gap between the top four
countries is narrow, with each contributing between 6.8% and 9.1% of total
arrivals.
If New Zealand citizens coming through our arrival gates all came from the same
place – let’s call it “Kiwiland”– that place would overwhelmingly be the largest
source country of arrivals. Just over 32,000 New Zealand citizens moved back to
New Zealand over the year to June 2017, meaning that arrivals from “Kiwiland”
made up a quarter of New Zealand’s “immigrants” in the past year.
Contribution to migrant arrivals by country
% of arrivals (excluding New Zealand citizens) over the year to June 2017
Rank Country Share of arrivals
1 “Kiwiland” 25%
2 China 9.1%
3 United Kingdom 7.7%
4 Australia 7.3%
5 India 6.8%
6 South Africa 3.8%
What does this all mean? The discussion above highlights a key point that hasn’t really been raised in recent
discussions about migration: what New Zealanders decide to do has a huge effect
on overall migration statistics. Although arrivals from most of the top source
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
80 83 86 89 92 95 98 01 04 07 10 13 16
Arrivals from Australia make up 20% of the total
Long-term and permanent arrivals, annual total
From other countries
From Australia
24
countries is higher than a few years ago, arrivals of New Zealand citizens are at
their highest level since at least 1980! And we haven’t even begun to look at
departures which, for Kiwis, have been at their lowest levels in decades. New
Zealanders do only make up part of the equation when it comes to calculating net
migration, but it is a significant part that needs to be considered to develop
balanced immigration policies.
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6. Migration’s contribution towards a more stable economic performance
Infometrics estimates that over the coming decade, net migration of between
10,500 and 16,600pa appears to be appropriate to maintaining New Zealand’s
population growth relative to world growth. However, with net migration currently
sitting at 72,300pa, a gradual approach to pulling back the numbers means that it
could be seven years or longer before net migration sits within this range.
Over a 50-year horizon, the uncertainties around population growth and broader
economic conditions increase. Our estimated average for sustainable net
migration over this period lies in the 13,100-21,600pa range. This article
investigates these aspects in more detail.
Maintaining positive population growth is an important facet of an economy’s
performance, at both a national and regional level. For example, an expanding
population enables retail businesses to achieve growth without having to rely on
each individual customer spending more. However, a shrinking population implies
that businesses would need to sell more to each customer over time just to
maintain steady revenue. The long-term outcome of this latter trend is for fewer
businesses in a town to be viable, reducing the services available to the remaining
people, making the town less attractive to live in, and reinforcing the trend of a
shrinking population. There are several examples of towns around New Zealand
where the population has been stagnant or shrinking for much of the last 30 years,
threatening the whole town’s long-term viability.
Arguably, the most problematic aspect of New Zealand’s population growth over
the last 20 years has been the significant swings in net migration. A relatively
steady rate of population growth allows planners, policymakers, and private sector
decision-makers to appropriately plan for the provision of housing, civic
infrastructure, and other necessary goods and services. But New Zealand’s
population growth has varied between 0.5% and 2.1%pa during both last decade
and this decade, making planning decisions that much harder.
Because New Zealand’s immigration policies operate independently from overall
population growth, migration flows, if anything, tend to exacerbate the economic
cycle. Strong economic conditions in New Zealand, particularly relative to
Australia, will encourage fewer New Zealanders to head overseas and more to
return home, but are also likely to attract more foreigners here to live and work.
Although migration is not the only cause of the current affordability crisis in the
Auckland housing market, the fact that population growth in the region has
accelerated so much over the last five years has definitely played a role in the
housing market’s imbalances. The response of monetary policy to the housing
market has been limited by a lack of inflation throughout the rest of the economy,
which has resulted in interest rates being kept low and forcing the Reserve Bank to
implement other measures such as loan-to-value restrictions.
But it is easy to envisage a situation where an earlier tightening in immigration
policy resulted in labour supply constraints limiting economic growth as well as
feeding into greater cost pressures, more inflation, and tighter monetary
conditions (which would help reinforce the slowdown in economic growth).
Arguably, in this situation, the housing market would have been prevented from
becoming as imbalanced as it has, with weaker demand due to slower population
growth and higher interest rates.
26
In our view, overall immigration, along with each of its subcomponents, needs to be
considered within the context of targeting a more stable rate of overall population
growth. So, when the net outflow of New Zealand and Australian citizens is small
(or, as is currently the case, is actually a net inflow), visa approval numbers across
the categories that generally contribute to permanent and long-term arrivals could
be scaled back. In other words, there would be fewer resident, work, and student
visa approvals during times when population growth was already relatively strong
due to the net flows of New Zealanders.
One of the obvious questions posed by limiting immigration when there are plenty
of job opportunities and the economy is growing strongly is “what about
businesses that are already finding labour difficult to come by?” Restricting
immigration during these periods would push up wages, encouraging businesses
towards more investment in labour-saving technology, thereby improving New
Zealand’s labour productivity. The scarcity of workers would also help ensure that
labour was directed towards the areas that it was most productive.
During periods of strong demand for workers, the mix of visa approvals could be
moved more towards the skilled migrant category, with fewer approvals of student
or family visas (which contribute less to the economy’s productive capacity, at
least in the short term). Approvals of onshore resident applications could be
increased to help maintain a reasonable supply of resident visas, while there could
also be scope to allow extra extensions of temporary work visas for people already
in New Zealand.
In periods such as the late 1990s, when New Zealand’s weak economic performance
contributed to a large outflow of New Zealanders, increased visa approval numbers
could have helped to keep population growth at a higher rate, boosting aggregate
demand and helping stimulate economic activity. There might be some scope for
increasing residence approval numbers, particularly compared with times when
overall approval numbers are constrained by the contribution of New Zealander
flows to population growth, but there must be caution that the bar for residency is
not lowered too far in terms of the skills contribution that immigrants can make to
the New Zealand economy.
Instead, the best vehicle for boosting immigration during such a period is likely to
be via increased approvals for those people on student and temporary work visas.
Although some immigrants in both these categories subsequently apply for
residency, people in both groups have a relatively high propensity to leave New
Zealand again within three years. Thus, issues of migrant quality, which are
particularly important for residence applications and immigrants’ long-term
contribution to New Zealand’s workforce, are less critical for migrants that are only
here temporarily. This assertion is backed up by the fact that any subsequent
residence applications for people here on student or temporary work visas will be
assessed on the skills (or other) criteria set down by government policy.
New Zealand’s population growth in a global context
We believe that aiming for a relatively stable rate of population growth should be a
central goal of migration policy. In this regard, determining what is an appropriate
rate of population growth to target is a second-order issue. Nevertheless, we
believe that targeted population growth:
• should not be negative, to prevent the problems associated with a shrinking
population
• should not be so strong that it causes undue stresses on the economy, even if
the growth rate is stable
27
• should not be so strong that the quality of immigrants being accepted is
detrimental to New Zealand’s overall skill base and long-term potential growth.
The final point hints that the potential supply of migrants wanting to come to New
Zealand is an important influence on the appropriate rate of population growth.
Anecdotally, New Zealand is relatively high on people’s choice of destination to
migrate to, so in theory there should be an almost unlimited supply of potential
migrants for us to choose from. However, slowing population growth, both in other
developed countries and in developing countries, raises questions about the
potential supply of migrants over the longer term.
Slowing population growth, an aging population, and a rising dependency ratio in
developed countries suggests that there could be greater competition from other
nations to attract skilled migrants over the medium term. At the same time,
slowing population growth in developing nations, due to improved access to
contraception and rising incomes encouraging more women into the workforce, will
mean that the pool of potential migrants wanting to shift to developed countries
might not be as large. The latter factor arguably has the most scope over the long-
term to undermine the quality of potential migrants looking to move here.
Hanging over the influence of these trends in global population are two other
macro developments. Firstly, we have seen suggestions that the falling real cost of
travel and rising incomes in developing countries are leading to greater
international mobility and, as a result, the trend in net migration to New Zealand
will continue to rise over the medium term. In our view, this one-sided projection
places too much weight on recent years in estimating the underlying trend in net
migration. It also fails to consider increased departure numbers that could result
from the growing ease of international travel.
Secondly, there has been increasing discussion in recent months about the rise of
automation and the future of work. Although the aging population means that New
Zealand’s already-tight labour market is likely to tighten further over the next 4-5
years, it is unclear what the relative demand for labour will look like over a 20-year
horizon, as technological advances potentially make a lot of current jobs obsolete.
Systemically higher unemployment could conceivably undermine the case for
allowing continued migration if those people arriving in the country are not able to
support themselves financially.
Graph 19
Keeping in mind the caveats that these possible trends present, we have estimated
appropriate levels of net migration based on New Zealand’s population growth
relative to projected population growth in high-income countries and total world
population growth. Over the coming decade, net migration of between 10,500 and
28
16,600pa appears to be appropriate given population growth overseas. However,
with net migration currently sitting at 72,300, a gradual approach to pulling back
the numbers means that it could be seven years or longer before net migration sits
within this range.
Over a 50-year horizon, the uncertainties around population growth and broader
economic conditions increase. Our estimated average for sustainable net
migration over this period lies in the 13,100-21,600pa range. However, slowing
population growth in developing countries could limit the supply of appropriately
skilled migrants so that a net inflow as low as 7,600pa could be appropriate at the
end of the projection period. The upper end of our range by 2068 is a net inflow of
28,900 people per annum – a figure that, given the expansion in New Zealand’s
population over the next 50 years, is equivalent to a net inflow of 20,500 people
per annum now.